Case o' The Week: Show Me the Money - Yeung and Restitution Orders

But as Judge Ikuta explains in a great new decision, "close enough" doesn't cut it when it comes to restitution orders. United States v. Judy Yeung, 2012 WL 432289 (9th Cir. Feb. 13, 2012), decision available here.

Facts: Yeung was convicted of mortgage fraud. Id. at *1. The schemes involved false info on mortgage applications, and straw buyers who ultimately defaulted on the loans. Id. at *1-*2.

After trial the district court held evidentiary hearings on restitution. Government witnesses did not identify the details of the home-sale transactions after default. Id. The court ordered restitution, using the same loss figures as it had for the guideline calculations. Id. at *3-*4. The total restitution order was over $1.3 million – reflecting the government’s calculations of the outstanding principal balance of the loans minus proceeds recovered from the sale of the collateral (the homes). Id. at *3.

The restitution order did not make a finding of the value of the loan at the point the secondary-purchaser victim acquired it. Id. at *6. The order also did not make findings of the value of the property at the time the victim took possession. Id. at *7.

Issue(s): “On appeal, Yeung argues that the district court erred in all restitution orders.” Id. at *4. Held: “First, the district court did not make a finding that [one of the secondary-market loan purchasers] paid an amount equal to the unpaid principal balance of the loans when purchasing the loans, and the government witness acknowledged that she did not have any information on that point.” Id. at *6. “In the absence of any evidence as to value of the loans at the time the victim acquired them, we cannot conclude that the district court’s restitutionary award was free from error.” Id. at *6.

[In addition], “the court cannot rely on the subsequent sales price of the real property unless it provides reasons why that sales price reflects the value of the real property on the date [the property buyer] took control of the property.” Id. at *7. “Because the district court did not provide reasoning to explain its determination of loss for purposes of § 3663(b)(1)(B), and because the district court did not determine the value of the collateral at the time [the victim-buyer] took title, we must remand for the district court to recalculate and provide its reasoning for this award.” Id. at *8 (emphasis added).

Of Note: This is a big defense win, with a remand on the restitution calculations. Does this also mean that the guideline calculations – based on the same loss figures – were wrong?
Nope. Id. at *7.

As Judge Ikuta explains, an estimate of loss is appropriate under the Guidelines. For the guideline calculations (in contrast to restitution), intended loss is fair game, as is gain realized by the defendant. Id.; see alsoUSSG §2B1.1(b)(1) comment. n.3

This is often a difficult concept for clients (and for many of us attorneys, to be honest): broad estimates of guideline loss are OK for sentencing, even if the restitution order is lower than these guideline-loss figures. Yeung is a good teaching tool to explain this counterintuitive concept.

How to Use: If you have a mortgage fraud case, sharpen your pencil, don your green eyeshade, and study Judge Ikuta’s restitution instructions in Yeung. Id. at *5-*6. She provides a step-by-step guide on calculating restitution in these daunting cases, explaining what to do when the ultimate victim bought the loan in the secondary market. Id. at *5. It is the clearest explanation around of a very complicated process: the decision takes pains to demand considerable accuracy in determining these restitution orders. Id. at *5.

It is worth bearing in mind that while our mortgage fraud clients admittedly aren’t angels, no one thinks that these secondary-market firms are saints. Judge Ikuta is careful in Yeung to lay out a process that avoids any restitution windfall to the “victim” secondary loan markets.

For Further Reading: Wow. When we blogged the tremendous Lopez-Avila prosecutorial-misconduct decision we urged a quick read, before the Az. USAO got the AUSA’s name removed. See previous blog here ("for further reading.")

No need to rush, now. In a remarkable order, Judge Bea flatly denied the government’s motion to redact the AUSA’s name. Judge Bea observes, “If federal prosecutors receive public credit for their good works—as they should—they should not be able to hide behind the shield of anonymity when they make serious mistakes.”See order here.

If you’ve ever been victim of prosecutorial misconduct, trust us – you want to read Judge's Bea order.

Image of the Honorable Sandra Ikuta from http://www.bmi.com/photos/entry/551405

Image of an accountant from http://phillygabe-n-terisa.blogspot.com/2011/11/things-im-thankful-for-day-12.html